We have reported before on how falling demand for steel in China coupled with a relatively modest decline in production has led to a boom in exports from the country. Last time we suggested that measures put in place by the Chinese government to curb the addition of boron to steel in order to qualify for tax rebates was likely to have only a temporary effect on export levels.
Immediately following the removal of the tax rebate on steel containing boron, monthly exports fell from 9.8 million tonnes to 7.4 million tonnes but as expected, resourceful Chinese steel makers adapted to the changes by finding other alloying elements to add to their steel in order to qualify for the rebate and export levels recovered to 8.4 million tonnes in June. Although this is some way below the peak months at the end of last year, exports in the first half of this year were 29% higher than in the first half of last year at 49.8 million tonnes, a figure in excess of a whole year’s production in Germany.
Interestingly China’s largest export market, South Korea, did not see an increase in the first half of the year with the country’s producers instead directing their steel towards the second largest market, Vietnam, who saw imports from China increase by 69% to 4.4 million tonnes. Within Asia we also see huge increases to SE Asia with exports to the Philippines, Malaysia and Indonesia showing strong growth. In addition, there were large increases to the Indian Subcontinent with exports to India, Pakistan and Bangladesh all growing by more than 50% with exports to the latter country increasing more than eight-fold year on year.
Outside Asia the US seems to have had some success in stemming the tide of Chinese imports as exports to the States fell by 4% and although we have seen some large increases in many countries in the MENA region, it is Turkey that has seen the largest increase outside of Asia as the country’s majority EAF based steelmakers struggle to compete with the very low cost BOS based Chinese production. The EU also continued to see increasing levels of Chinese imports as exports to the region increased by 31% year on year. Traditionally it has been the UK that has been most susceptible but so far this year, it is Italy that has suffered the largest increase with Chinese exports to the country increasing by an incredible 88% to over one million tonnes. Once again, it is notable that Italy is a country with a high proportion of EAF steelmakers who are finding it difficult to compete with the ultra-low prices of Chinese BOS producers.
The increase in Chinese exports is having a tangible effect on the domestic steel markets within these countries. Turkish crude steel production is down 6% year on year and crude steel production in Italy has collapsed by 11% when compared to the first half of last year. It is unsurprising, therefore that following the lead from the US, the European Commission opened an investigation into alleged dumping of cold-rolled flat steel by China and Russia in May and has imposed a series of tariffs to counter surging imports of various grades of steel, including stainless.